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Interactive marketing and media, once an extra for traditional marketers, is now being integrated into the overall media mix.

A rich spectrum of digital marketing and media tools is emerging, ranging from games and short films designed for brand-building, lead generation and data capture to 3-D product showcases and entertaining episodic content.

While excitement builds around the creative aspects of interactive marketing and the potential for online programs to solve marketers' problems, near-term prospects for the segment remain dicey. The good news is marketers can use the time to experiment with new interactive ad formats and marketing programs.

U.S. online ad revenue will increase a modest 5% to $6.3 billion in 2002, compared with $6 billion in 2001 and $7.4 billion in heady 2000, according to Forrester Research. The numbers do not include online classified ads.

Jupiter Media Metrix, meanwhile, forecast a 19% increase to $6.8 billion in 2002 (with $5.9 billion in online media and $914 million in online classifieds), compared with $5.7 billion in 2001. One reason for the divergence: Jupiter's forecast came from August 2001, while Forrester modified its numbers after the Sept. 11 attacks.

Marketers say they want to spend more money online but remain loath to open their wallets, according to executives at digital agencies and industry analysts. Interactive budgets within most traditional marketers are allocated by product group and brand, making it a challenge to execute integrated cross-company brand initiatives.

"If the economy doesn't stabilize [in 2002], if it continues to slow down and the recession deepens, there's no way for the Internet sector to recover," said Sean Kaldor, VP-analytical services, Nielsen/NetRatings. "There is no budget to be spent right now. ... Everyone is cutting, not just online but offline too."

Matt Freeman, CEO, North America for Omnicom Group's Tribal DDB Worldwide, said traditional marketers, including a few of Tribal DDB's clients such as Anheuser-Busch Cos.' Budweiser, Volkswagen, PepsiCo's Pepsi-Cola Co. and McDonald's Corp., are slowly waking up to the brand opportunities of online advertising. "In the second half [of 2002] it's going to come down to some notable cases of Internet programs driving real business results."

Online sponsorships, along with classified advertising, have gained favor among marketers and are likely to gain more ground in 2002.

For the third quarter of 2001, sponsorships accounted for 25% of online revenue, classified ads 17% and the much-maligned banner ads 35%, according to the Interactive Advertising Bureau. In 1997 for the same period, banner ads made up 54% of online revenue.

Fees charged for premium ad placement and/or exclusivity, a newly tracked category for the IAB, racked up 7% of online ad revenue for the third quarter 2001 and are expected to grow modestly. Other factors in the online revenue mix for 2002 include e-mail, keyword and directory searches, interstitials, Superstitials and other rich-media formats including MPEG video. A diversified media mix is generally viewed as a positive, though coming up with measurement standards for this bevy of emerging media is something with which the industry continues to grapple.

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